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Home » Looking at Trends in Water Heating

Looking at Trends in Water Heating

Taking a tour around the U.S. and Canada to see what is trending and of concern in water heating.

April 1, 2018
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Before the invention of the water heater, getting hot water for bathing was a struggle. In the 1700s, baths were taken on an average of once a month. Most homes had one tub which required everyone in the household to use the same water. Water was heated in small batches over an open fire or on a stove and transferred to the nearby tub, usually in the kitchen. The father bathed first, followed by any other older male relatives, then the wife, and finally the children from the oldest to the youngest. By the time the baby was bathed, the water was so dirty the baby could hardly be seen. You’ve probably heard the saying, “Don’t throw the baby out with the bathwater.”

We have come a long way since those days with the invention of the first water heater and its multiple improvements over the years. Technology has made our lives much easier, but what more can we do? What can still be improved and what are the trends for providing hot water?

The last few years the water heating industry has gone through many regulatory changes. We surveyed experts from across the United States, Canada, and the Caribbean to see which applications for heating water are trending in different areas and why. To do this, we solicited the expertise of six Manufacturer’s Representatives to tell us what was happening in their neck of the woods. Focusing on trends and not products, we received an interesting mix of what people are demanding in the different regions. Let’s take a tour now to see what is happening.

Eastern United States

Headquartered outside of Boston, Massachusetts, Emerson Swan, Inc. is a  leading Manufacturer’s Representative of plumbing, heating and HVAC products in the United States. We asked George Simas, III, president of The Swan Group and COO of Emerson Swan, to report on trends in the Eastern part of the United States.

We asked: What are the top trends you see in water heating, both in commercial and residential?

Top  Trends:

Residential Trends:

  • The National Appliance Energy Conservation Act (NAECA) and The Department of Energy (DOE) mandates are driving the trends for high-efficiency products.
  • Multi-Unit construction (MUC) specifying engineers are moving more toward tankless products.
  • Building automation and controls are becoming very user-friendly.

Commercial Trends:

  • Space constraints are an issue and a growing concern, as products that make a smaller footprint are becoming the trend. This is replacing the traditional furnace and boiler combination product.
  • Building intelligence is becoming mandatory and allows for ease of management. Products that fit this profile are rising in popularity.

Educating/Training Customers:

Buying a water heater, like buying a car, involves a few decisions. You can select a basic model or go all-in, but how does a customer choose? It’s all about educating the customer and understanding their concerns.

How do you educate your customers on the cost of ownership vs. just quoting and selling a product?

Sizing and selection seminars are an essential and vital way to truly understand not only the customer’s needs but what the customer is selecting and why. Hands-on service training is vital because products are becoming much more technical. We focus on the topic of recirculation, as that will determine which product is needed and best suited for what the customer wants to accomplish. And, return on investment based on utility cost and rebates is a big topic to cover because the ROI can pay for itself after the first few years.

Tankless vs. Traditional:

The debate of tankless vs. traditional continues: both have advantages, and both have made advancements on many levels.

We see 10 to 15 percent tankless sales in the East. The deciding factors are gas pipe size and the existing regulator, as well as venting, recirculation, and customer awareness. Tankless is perceived to be a higher end product, more suited for a second home or where there is a small mechanical room. Some utilities are aggressive with rebates, but perception vs. reality is an issue. The trend is moving toward more tankless because of space and the leaks with tanks.

Solar Heating and Hybrid Heat pumps:

All the major players have offerings in heat pumps, but this makes up for less than 2 percent of sales in the areas we serve. Heat pumps are driven by utility rebates, and contractors shy away because of not fully understanding the refrigeration side.  The cost of fuel drives Solar’s popularity; if the energy is less expensive, solar loses its demand.

Efficiency and Smart Technology:

Advances are being made every day in technology. Electronically Commutated Motor (ECM) smart recirculation offers intelligent speed control, and condensing wall hung water heaters offer small storage. Connectivity for energy management is advancing, and consumers are becoming better educated with the Internet of things (IoT), which is growing, but is small at this point. Geofencing is on trend as more people rely on their smartphones to handle every aspect of daily life.

The most requested smart technology features requested are for leak detection as well as recirculation.

New York and Surrounding Area:

Dellon Sales Co. is a full-service manufacturer’s representative firm marketing various manufacturers of plumbing supplies and related products in Metro and Update, New York and Northern New Jersey. We asked David Dellon, president, to talk about trends in his area.

Top  Trends:

  • In residential, especially high-end homes, we are seeing a greater demand for higher efficiency and higher output units, and often end they up using indirect water heaters. We are seeing constant growth of the tankless combination units and/or wall hung water heaters into the market.  Often installed due to a perception of cost savings; unfortunately, homeowners don’t realize these units need to be serviced by a licensed technician every year which negates most of the perceived savings. The aging of initially installed power vented and power direct vent has created a bigger demand in the repair and remodel market then has been  seen previously.
  • In commercial, we are seeing a greater demand for higher efficiency units, driven by knowledgeable contractors and engineers. Multifamily projects are changing from the concept of one large unit or a few larger units in a centralized area, such as a basement, to individual units located in each apartment or in a dedicated space. Often this is to transfer the management and payment of utilities from the management company to the individual homeowner.

Educating/Training Customers:

We work together with wholesales to make sure they understand the benefits and long-term cost savings of each product. They are then able to convey this information to the end user and are more of a trusted adviser than a product pusher, so they develop a client base that is loyal to them verses the lowest price out there.

This is accomplished by onsite training, co-hosting plumber association meetings, joint sales calls (especially for more difficult projects), providing and distributing sizing guides, product one sheets, a user-friendly website, and, most importantly, 24-hour tech service.

Tankless vs. Traditional:

Currently we are just around 3 percent in tankless with a prominent gas market. The sales are driven by rebates and the impression that this is a luxury item. We will probably see this number increase to about 5 percent of the market, but I do believe we will hover there. In the Northeast, our colder winters often dictate different style heating systems than other parts of the country where tankless heaters are more prevalent.

Solar Heating and Hybrid Heat pumps:

These items in our area are not popular and rarely used. They are far less than 1 percent of our total sales.

Efficiency and Smart Technology:

Smart controls and self-diagnostic controls are the biggest leap forward in the last few years. The embracing of new technology varies by the end user., as the Internet of things (IoT) is becoming widely recognized as the future of the residential home.

We see some wholesalers and end users that look to the future and embraces it while we have some wholesalers and end users that hold on to  nostalgia. As far as conservation, unless the contractor/ builder/engineer is working on a LEED project, there is limited focus on conservation.

Natural Disaster:

About 5 years ago, we suffered the effects of Hurricane Sandy. Flooding caused the need to replace many water heaters. There were some end-users that converted to wall hung units to limit the risk of future flooding, especially in shore areas. Many houses were rebuilt on stilts and had their heating rooms located on the first floor instead of at ground level. We also saw the change of using electric units on the upper floors verses tradition units generally placed in the basement of first floor to limit risk as well.

Gulf Coast and Southern U.S.

Tim Morales & Associates, Inc. is an Independent Manufacturer Representative agency focused on the wholesale plumbing & industrial distribution channels. The company is located in Mobile, Alabama, and services the states of Louisiana, Mississippi, and Alabama, and West Florida. We asked Tim Morales, president, to fill us in on what is happening in that part of the country.

Top  Trends:

  • Tankless water heating, connectivity and leak detection are the trends that stand out. Without question the primary trend is a shift towards tankless technology.  And while we can preach the efficiency and environmental benefits of these units, at the end of the day, consumer feedback is somewhat surprising. For example, residential consumers simply love endless hot water. When I am asked by a homeowner who is considering conversion how much they can expect to save, I must answer, “that depends”. All things equal, one will likely experience a relatively quick payback. However, if a family has limited their showering habits to the capacity of their tank type water heater then all bets are off.
  • From a commercial standpoint, redundancy, efficiency, and space savings are the three most commonly recognized benefits. In the past, when a heater went down, hotels were forced to refund inconvenienced guests, and restaurants were forced to shut down due to Health Department regulations. While modern tankless technology may require four tankless heaters in place of two tank types, if one goes down you still have three. Furthermore, the efficiency and turn down ratio of most tankless brands delivers hot water at significantly lower cost than traditional options. And lastly, because tankless heaters can hang on the wall, or be located on rooftops, or other exterior locations the space savings is a benefit commercial owners and designers never overlook.
  • Connectivity is also growing rapidly in this category. Products with the ability for remotely adjust and trouble shoot are growing in demand throughout residential and commercial markets. The same is true in with leak detection technology.

In the age of all things connected, leak detection technology is a growing trend. While today I would argue that most applications are reactive, that is units being installed as a reaction to a flood event, I do see a trend to embed smart technologies in new construction. With both the Gen X and Millennials playing a bigger role in housing demand, this is a trend that will continue to grow in popularity. Further as the cost of these technologies continues to decline, connectivity is transitioning from a luxury to an essential component of all projects, residential and commercial.

These trends have replaced the concept that the only way to know your heater is leaking, is to see water in your water heater pan. They have replaced the notion that you should boil water 24/7/365 — just in case there is a need. For the contractor, the trend toward brand loyalty is being challenged by smarter, connected products that allow them to load their truck with the right part before they leave the shop.

Educating/Training Customers:

The role of the independent manufacturer’s representative has increased exponentially over the past three decades. Today’s rep is now responsible for not just educating our wholesale distribution partners, we must also promote our products to home builders, mechanical designers, owners, and, most importantly, the contractors who are the front line and face of our product. Today many reps operate their own training centers. Others supplement their training efforts with mobile showrooms. These services have become an essential part of the value we deliver to the trades, to our distributors and partners, and to the manufacturers we represent.

As products have become more sophisticated so too has the need to educate our downstream partners. Today’s tools of the trade include mobile apps that do everything from the delivery of leads and literature, to product sizing, registration, and trouble-shooting support. Online courses are also available to assist wholesalers and contractors communicate the value of these innovative products. For the more expensive items such as tankless systems, funding sources are even made available to assist in overcoming financial objections.

Tankless vs Traditional:

In residential new construction,  the decision is rather simple. Is gas available in the community and does the builder wish to offer the premium of tankless water heating? In retrofits questions such as the availability of combustion air, gas pipe sizing and venting play a major role in feasibility. That said, recent innovations in condensing tankless technology offer some solutions. One brand allows existing b-vent to serve as conduits for flexible PVC venting. This eliminates the expense of changing out traditional gas vent pipe. Modern gas valves and induced draft designs also make many applications feasible that were no go’s just a few years ago.

When your hot water demand is minimal, such as hand washing at a mall, tankless, or point of use electric heaters are a good choice. When you have gas and combustion air available at a feasible location, gas will always be the preferred fuel. After all most of our electric generation plants in the US are powered by natural gas for a reason. (34 percent).

While tankless does have a higher upfront cost, the ownership cost and creature comforts delivered offset any difference. The average cost of a new home in America is approaching $200,000.

For a few hundred dollars more builders can allow their customers to enjoy the benefits of tankless. This is particularly important in the age of modern showers where consumers are expecting multiple devices, and soaker tubs that will quickly deplete a traditional tank type heater. Sizing your water heating capacity to tub well size and showering devices is critical to home owner satisfaction.

Efficiency and Smart Technology

The next big step we see in technologies is the efficiencies gained in condensing tankless technologies. Just a few years ago, many indoors applications were not feasible due the high cost of specialized venting. Modern condensing heaters bring into play polymers such as CPVC and PPR that make venting far less taxing. This is especially true in commercial applications where common venting of multiple heaters is required. Another advantage is the extremely low nitrogen oxides emissions these units produce versus traditional water heating equipment.

Smart technology is not a big seller in our area. Along the Gulf Coast, this is more the exception than the rule; though the trend is toward a growing acceptance of these features. At this point connectivity, as it relates to water heaters, is intended to provide advanced notice of a system problem.

From a consumer perspective, we have not seen significant buy in yet. That said, smart contractors love the diagnostic and monitoring features imbedded in certain brands of heaters. They are simple to access and provide a level of visibility into system performance that has not existed in the past. These features allow contractors to troubleshoot quickly and accurately resulting in much more efficient use of their time.

Caribbean

Inter American Builders Agencies Co. Inc. is a Manufacturer’s Representative company in Puerto Rico and services the Caribbean. We asked Ricardo Jimenez, president, to talk about what is happening in the islands.

Top Trends:

  • Residential: No new trends here are emerging, except solar water heaters are gaining market share every year. The market changed drastically in the 90s when electric instantaneous units started appearing in force. Currently, these units have around 50 percent of the market and have remained steady for the last few years. The rest of the market is divided between tank and solar products.
  • Commercial: With the cost of electricity in Puerto Rico quite high, engineers are specifying high-efficiency gas products.

Educating/Training Customers:

The best way to educate our customers on the cost of ownership is face-to-face and onsite. This applies to all customers:  wholesalers, retailers, and engineers.

Tankless vs. Traditional:

We believe the breakdown in Puerto Rico to be 50 percent electric instantaneous, 30 percent tank/traditional, and 20 percent solar. Customers are drawn to electric instantaneous due to space and the possibility of saving electricity.

Tankless is not considered a luxury product, as our market is inundated with inexpensive electric units. Unfortunately, customers that purchase these units are not aware these units are not capable of delivering the amount of hot water they need, as more than 90 percent of the units are 7,200Watts/30Amps.

Solar Heating and Hybrid Heat pumps:

Our tropical island has long sunshine-filled days, which makes solar water heaters very popular due to cost and the ability to produce a lot of hot water. There are several local manufacturers of these products who export them to other islands and South America.

Hybrid heat pumps are not a factor in our market. The cost and complexity of the product have discouraged the customer, who, in turn, will select a solar water heater instead.

Efficiency and Smart Technology

We see customers embracing smart technology and internet connectivity. We see this more in the industrial factories and some commercial projects.

Most of the new technology for residential tank units have already been done on gas valves for gas units, which is not a significant factor in our market.

Water conservation is a need in our area, but the adaptation to this is coming very slow. Most individuals are more interested in conserving electricity. We believe the shift will happen as individuals are implementing changes in their lifestyle and products they consume.

Natural Disasters

We asked:  If a natural disaster has happened in your area, what have you seen as the response regarding replacing new product – what are/is commercial vs. residential doing differently?

We are living this question. This first two months after the hurricane, our sales were nonexistent. After that, the first big spike happened, and it was in sales of solar water heaters, as most water heaters were damaged, and people did not have electricity. As electricity started to come back online to different areas of the island, sales of electric water heaters, tank and tankless, came back strong. I must mention that gas water heaters are not a factor in our market, as only 1 percent of the Island has liquid petroleum gas
distribution via pipes (no natural gas). The sales of tank units came back strong both for residential and commercial products.

Central/Midwest

Bornquist is a Manufacturer’s Representative company in the HVAC markets throughout Northern Illinois, portions of Northwest Indiana, and Eastern Iowa, and celebrating their 80th year in business. We asked Dave Bernholdt, sales manager, to talk about is happening in the Midwest.

Top Trends:

  • Higher demand for more instantaneous gas heaters, especially on the commercial level.
  • Hospitals are trending away from steam water heaters, even when a steam plant is present.
  • There is a marked decrease in non-condensing gas heaters.

The main driver for these trends boils down to cost. Competitive products in the market have replaced less efficient technologies and save utility energy, lowering the cost for the end-user. There is an increased demand for instantaneous gas heaters and less for storage tanks, which frees up space and installation costs, and provides a better footprint for architects. In addition to running more efficiently, smaller equipment is less expensive to replace down the road at maintenance time. Hospitals are taking loads off inefficient steam plants, which saves operational expenses by using high efficient condensing technologies. The condensing heater trend was started by the engineering firms, then slowly pushed forward with government regulations and finally by manufacturers. There are many competitive products in the market, as this trend is taking over on most projects.

Educating/Training Customers:

To educate our consumer on the cost of ownership, we provide warranty comparisons and replacement product layouts and scenarios. Also, proprietary software from vendors to calculate building loads and estimated savings for end users helps to show the full picture regarding expense and return.

Tankless vs. Traditional:

Our area trends toward the traditional tank, as space is not an issue and installation is less expensive. With about 5 percent being tankless, we see this trend in electric for remote sinks. Tankless holds a premium price tag, which some customers may consider a luxury product and shy away. But, building engineers and owners consider making hot water a requirement of heaters and do not think of one style as being more luxurious than another.

Tankless is a growing trend in commercial projects, and in residential the trend is growing as architects work them into new designs.

Solar Heating and Hybrid Heat pumps:

We have lost popularity in these categories as local solar incentives have dried up and utility costs have decreased with increase fracking production. Hybrid heat pumps are costlier on the front end and costlier on the maintenance end.

Evacuated tube solar collectors have improved in quality and price, and for this, we see a slow gain in market share. Trends are telling us that stand-alone heat pumps (that customers can connect to their water heater) are going completely obsolete.

Efficiency and Smart Technology

The biggest steps we see in technology is in heat recovery. On a commercial basis, this can be from an internal source (recovering waste heat from cooling equipment or process equipment), and residential basis can be from an air conditioner.

Most end-users want technology in the equipment which helps in less maintenance, fewer parts, and a lower failure rate. We don’t see customers embracing smart technology/internet connectivity. There are some early adopters that will go along with it if it is simple for them to use.

Equipment quality is the number one concern over technology. The cost of replacing broken equipment is too great.

Pacific Northwest:

Hollabaugh Brothers & Associates is a stocking manufacturers’ representative for the wholesale plumbing and HVAC industries in the Pacific Northwest. Hollabaugh Brothers & Associates has supplied contractors, builders, and wholesalers with the finest products since 1945. We asked Chad Hollabaugh, president, to discuss what is happening in his area.

Top Trends:

  • Higher efficient products are trending due to national and local codes and standards mandating higher efficient products. Standard efficient products have practically been eliminated from residential and commercial new construction. Standard efficient products are still used mainly on the replacement side of the business due to ease of replacement.
  • Connectivity: Pockets PCs are an integral part of almost all of society. The need for more information and connected products within our homes and businesses is just getting started.
  • Smaller Footprint. Increasing costs per square footage and the need for faster, easier solutions to water heating due to high labor costs will continue to rise. This drives the demand for more tankless water heater solutions.

Educating/Training Customers:

We educate the consumer on the cost of ownership vs. just quoting to sell a product. We discuss multiple facets when it comes to product selection. An example on the higher end of the spectrum would be comparing an electric heat pump water heater to a standard residential resistance electric water heater. The HPWH has a 10-year warranty vs. standard six year. Its annual average fuel cost is just under $200 while the old resistant electric water heater is close to $500. Over the 10-year warranty period, this can provide $3,000 of fuel cost savings, all based on national averages of course. In the northwest, we have multiple rebates offered, which results in beneficial cost savings.

We help steer consumers to tools that can help them become educated on the products and savings. As an example, you can find payment calculators on websites for high efficient residential and commercial products. There are also sizing app for smartphones that show the annual fuel costs for different products selected.

Tankless vs Traditional:

The area is still predominately a tank market, with 80 percent being gas fired. Tankless is not to be left out, as it continues to make double-digit sales growth. This is fueled by the ongoing construction boom in all NW states, with the except Alaska, as the cold inlet water temperatures have limited the sales to some extent. The decision on tankless or tradition depends on whether the customer is looking for a replacement or has new construction.

Replacement cost, availability, and ease of replacement are the primary choices reasons. In most cases, a customer is dealing with either no hot water or the likelihood of not hot water very soon – resulting in the need to replace as quickly as possible.

Gas is by far still the least expensive fuel based upon cost per therm vs. cost per KW if electric. We have pockets of low electric prices in the Northwest, mostly in Eastern Washington where the luxury of hydroelectric power costs can be 25 percent of the national average. In these areas, electric is king.  Another facet is the heat pump water heater being 2-1/2 times more efficient than a standard resistant electric water heater. This savings, on top of the green initiative of no carbon emissions compared to gas type, make it a formidable player against gas.

Tankless is no longer considered a luxury product as more consumers hear about endless hot water, and the price of standard water heaters has increased due to the efficiency upgrades. The price differential is not what it used to be. Gas tankless growth will continue to grow in market share, as the smaller footprint and longer warranties are driving the growth.

Solar Heating and Hybrid Heat pumps:

Solar water heating is almost non-existent in the Northwest. According to the Northwest Energy Efficiency Alliance (NEEA), hybrid heat pump water heaters have accounted for 13,000+ unites in sales. Rebates on heat pump water heaters are being reduced or eliminated, causing a market decay as builders find tankless gas is less expensive.

Efficiency and Smart Technology

Water heaters in the future that have connectivity and can give out adaptive service information will progress the market even further. Customers are starting to embrace smart technology and internet connectivity. Apps and simple connectivity are a small percentage of the request. We have been told that within 10 years home ownership of Millennials will move from 10 percent to over 35 percent of the housing market. Therefore, we expect to see a shift soon as this generation takes hold.

CANADA

The Morgan Group is a Manufacturer’s Agency based in Markham, Ontario. Canada, and providing heating, ventilation, plumbing, and gas piping systems. We asked Brian Morgan, Principal at The Morgan Group to talk about what is happening in Canada.

Top Trends:

  • Residential: Combination domestic hot water (DWH) and space heating with tankless/boilers. The importance that drives this trend is a combination of cost, ease of installation and efficiency. The replacement of two fuel burning appliances with one offers the end consumer with a less expensive install and space savings.

Replacing tanks with tankless. This ongoing trend will continue in the residential new construction markets to overcome the challenges of venting, space, and efficiencies. In the replacement market, the consumer is becoming more informed and conscious of space and energy costs and tankless offers an effective solution.

Government Intervention. Historically, high-efficiency equipment has been expensive to purchase, install and maintain in comparison to traditional water heating equipment. The Federal and Provincial governments have accelerated minimum efficiency ratings for appliances. For example, in the Ontario Building Code under SB 12 minimum DHW EF Factors range from .67 to .80 depending on the package that the builder is offering. Governments across Canada have begun creating Carbon Banks to fund new technologies and more efficient equipment.

  • Commercial: Higher efficiency condensing. In many commercial applications such as residential, hospitality and institutional segments, domestic hot water is a large expense. The implementation and payback of high efficiency condensing equipment offer faster paybacks for the owners.

The trend in commercial is combined boiler and domestic hot water plants. As investment is being made in high efficiency and condensing, there is the opportunity to take advantage of both heating and domestic requirements from one heating plant.

Government Intervention. The government continue to strive towards a Net Zero mandate in Canada and is changing the minimum efficiency ratings of domestic hot water appliances. These changes are forcing changes for the manufacturing, project design and installation of domestic systems.

Educating/Training Customers:

The cost of ownership is important to understand, and we discuss the payback expectations for the customer. In Ontario, there is an option by a variety of companies that offer rental water heating appliances to home and building owners. The asset is owned by these companies and rented back to the consumer. This provides a piece of mind that all servicing of the hot water heating appliance will be looked after by the rental appliance provider. This alleviates the upfront cost of the appliance and installation and provides the consumer with a monthly rental price.

We have a variety of tools available to the contractor, engineer, and distributor to use to work with their customers. These include apps or online sizing programs, websites, testimonials, brochures, training presentations, and local relationships working with our customers on their daily needs and requirements.

Tankless vs Traditional:

Tankless continues to grow; however, it only represents 7 to 14 percent of the total water heating market depending on who you speak to. The deciding factors to go tankless are space and efficiency. Tankless is not considered a luxury product and is being used in new residential construction in our market. The trend is gaining strength, based upon combination heating appliances, building codes such as the P.9.11 Standard for tankless water heaters and air handlers, cost of construction being mitigated with rental equipment and the size of the average urban home.

Solar Heating and Hybrid Heat pumps:

Neither are popular in the market today due to the colder temperatures and shorter days in the winter months. I would suggest that less than 5 percent of domestic hot water heating sales include hybrid heat pumps or solar thermal heating.

The payback currently is too much to justify these two technologies for domestic water heating in the mainstream market. As both technologies are renewable and reduce the carbon footprint, there is interest in government, engineering, and green building experts to see this type of technology succeed.

Efficiency and Smart Technology

The biggest step in technology that we see is the ability for our industry to adapt to the expectations of the end consumer. The smart home and drive to control the consumer dashboard for all the energy needs of the consumer are what the challenge is before the hot water industry. How do we fit? How do we adapt? What is important to the consumer?

The contractors are embracing technology and becoming more familiar, especially when it provides them with the ability to diagnose, troubleshoot and chart appliance performance. They are asking and excited about app technology that provides notification of issues for a customer before they are even aware. This creates a proactive approach versus reactive.

Wi-Fi interaction with equipment seems to be the ongoing requested technology to allow the end user to know if there is an issue and to track their performance and energy savings remotely.

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